Store Account in Indian Railways

Part-2

Management of Stores in Indian Railways

Ref: Indian Railway Stores Code (Vol. I & II), GFR 2017 & Railway Board Guidelines.

Effective management of stores ensures the availability of material when required, while minimizing capital blockage, obsolescence, and storage costs. Key elements include stock level determination, inventory control techniques, and periodic review mechanisms.

Stock Levels

(Ref: Indian Railway Stores Code Para 2314, 2316, 2319)

Minimum Stock

• Represents the lowest permissible level to which stock may fall without initiating a replenishment.
• Calculated as:

Minimum Stock = Average Weekly Issue × Lead Time in Weeks

• It acts as a Stock Order Point, indicating when a recoupment demand should be initiated.
• Should be fixed conservatively, considering:
• Market volatility
• Proximity to the supply source

Maximum Stock

• Denotes the upper limit of stock, beyond which procurement should be avoided.
• Generally, it should not exceed twice the minimum stock.
• Determined considering:

(i) Economic Order Size

• Avoids frequent small orders that increase packing, handling, clerical effort, and supplier inconvenience.

(ii) Capital Lock-Up & Risk

• High stocks involve increased inventory carrying cost, deterioration risk, storage needs, labour costs, and chances of surplus accumulation.

Economic Order Quantity (EOQ)

(Ref: IRS Code Para 2321, GFR 2017 Rule 145)

EOQ is the optimal order size that minimizes the total cost of ordering and carrying inventory.

Q = sqrt{{2AS}/{I}

Where:

• AA = Annual consumption (value)
• SS = Setup (ordering) cost
• II = Inventory carrying cost
• QQ = Order quantity

Related Calculations:

• Average Inventory = Q/2
• Total Carrying Cost = Q×I/2
• Total Ordering Cost = A×S/Q
• Total Cost = (QI/2)+(AS/Q)

Unique Identification Code — PL Number

(Ref: IRS Code Para 2102)

Each store item is assigned a Price List (PL) Number, an 8-digit numeric code based on the Modulus-11 system.

Example: PL №37130262

• 37: Group
• 13: Sub-group
• 026: Item Serial
• 2: Check Digit

A Price List includes the nomenclature and book average rate of all items, identified by their PL numbers.

Inventory Control Techniques

(Ref: IRS Code Para 2312, 2313)

1. Care in stocking new items (Judicious stocking of new items)
2. Accurate demand forecasting (Demand on the basis of actual requirement)
3. Scientific recoupment policies
4. Selective inventory management
5. Management by exception
6. Standardisation of items (Standardisation of items to keep stocking items at minimum numbers)
7. Variety reduction
8. Value analysis
9. Disposal of overstocks
10. Surplus review
11. Scrap disposal

Selective Inventory Control Techniques

(Ref: IRS Code Para 2315, 2316)

1. ABC Analysis (Always Better Control)

• Based on annual consumption value:

Focus is concentrated on ‘A’ category items due to their high financial impact.

2. VED Analysis

• Based on criticality for operations:

VED analysis is crucial for ensuring service level continuity.

3. FSN Analysis

• Based on movement frequency:

Helps avoid blocking funds in slow or non-moving items.

Disposal of Overstock

(Ref: IRS Code Para 2335 to 2337)

Timely disposal:

• Releases blocked capital
• Reduces risk of obsolescence, theft, and damage

Railway-prescribed overstock limits:

Surplus or Inactive Review

(Ref: IRS Code Para 2340, 2341)

• Items not demanded for 24 months or more are classified as Surplus Stores.
• Items with no demand for 12 months or more are treated as Inactive Items and monitored.
• Helps in:
• Avoiding fresh procurement
• Finding alternate usage
• Planning disposal or reallocation

Key References

• Indian Railway Stores Code Volume I & II (Particularly Chapters XXIII & XXI)
• Indian Railway Finance Code — for capital budget and inventory provisioning
• GFR 2017 — Rules 145, 149, 153
• Railway Board Circulars & Orders — for periodic changes in procurement, inventory norms